The government has announced plans to relax invoice finance rules early next year, which will be music to the ears of many SMEs.Britain currently suffers from a bad late-payment culture, where UK SMEs wait an average of 72 days for their invoices to be paid – a day more than one year ago. An estimated £26bn is owed to Britain’s small businesses in unpaid invoices. The impact of the recession has meant that the smallest businesses now wait an average of 11 days longer for payment than they were even at the recession’s height. “This was taken as a protective measure to safeguard their financial positions during the credit crunch, and it became the norm for many businesses to pay late,” explains John Atkinson, head of commercial business at Hitachi Capital Invoice Finance. “In essence, the longer that firms are able to hold on to money, it allows them to strengthen their position and make funds work harder. But it’s Britain’s small businesses that have felt the brunt of this.” This could soon change. So-called “bans on assignment” rules, which prevent smaller suppliers from using invoice finance, are often imposed by bigger businesses when dealing with SMEs. While this has hampered the growth of small firms for a number of years, the rules are set to change as part of the government’s wider Small Business, Enterprise and Employment Act. A number of new measures are being introduced in 2016 to tackle late payments. “This change is long overdue and is an extremely positive step for the growth of Britian’s SMEs,” adds Atkinson. “Unpaid invoices are the biggest asset some small businesses have and the law has been unfairly stacked against them until now.” Read more about invoice finance here:
- The UK’s key invoice finance players
- Invoice finance: Dispelling the myths
- Invoice finance: Is it for you?
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